The races in America have vastly different economic statuses. Racial minorities make less money and own less wealth than Whites. This one fact is a large determinant of racial inequality in the U.S. Yet, this fact is not the only determinant of racial inequality as there the context, both historical and present day factors play a part in this inequality as does one’s personal narrative. I will consider all of these in my paper.
According to Pew, Black wealth in 2007 averaged $16,600 but by 2013 averaged $11,000. Hispanic wealth in 2007 averaged $16,000 but by 2013 averaged $13,700. In contrast, White wealth averaged $192,500 and in 2013 averaged $141,900. Whites in 2013 had 13 times the wealth of Blacks and 10 times the wealth of Hispanics in 2013. In 2010 it was 8 times the wealth of Blacks and 9 times the wealth of Hispanics in 2010. So, it seems that Whites, the dominate racial group, are doing much better financially than minorities, and the Great Recession only made it worse. If we consider the statistics we find that in 2007, Whites owned 10 times more wealth than Blacks, but this increased to 12.9 by 2013. When compared to Hispanics, Whites owned 8.2 times more wealth than Hispanics in 2007, and this increased to 10.3 by 2013. The average American household had $81,400 in wealth in 2013, but in 2010 it was $82,300. The median income for nonwhite households fell 9 percent from 2010 to 2013, compared to only 1 percent decrease for Whites (Pew).
If we consider data put out by the Social Security Administration, we learn that “Racial and ethnic differences in housing equity narrow among households in the higher income quartiles, whereas differences in non-housing equity generally widen as income increases. The widening gap in non-housing equity stems from differences in financial asset holdings, particularly risky assets. At every income quartile and educational level, the percentage of black and Hispanic households that own risky, higher-yielding assets is considerably smaller than the percentage of white households. Thus, some of the wealth gap appears to be attributable to differences in saving behavior. The Social Security Administration also says that the fraction of people ages 65 or older reporting some income from assets increased from about one-half in 1962 to roughly two-thirds in 1998. In 1984, 73 percent of whites age 65 or older received income from assets, compared with 31 percent of blacks and 38 percent of Hispanics. In 1998, 69 percent of older whites had income from assets, compared with 26 percent of blacks and 33 percent of Hispanics. Additionally, white households have at least five times the wealth of minority households yet earns, on average, just twice as much as minority households. Racial differences in home equity, adjusted for income, have been explained by credit, financial, neighborhood, and home ownership disparities, in addition to the prevalence of discrimination among lenders. As income increases, so does housing equity; thus the greatest racial and ethnic disparity occurs in the lowest income quartile. Among homeowners, differences in equity by race and ethnicity generally diminish with rising household income.” (SSA)
According to Forbes, the wealth gap between Blacks and Whites goes as far back as the 1934 National Housing Act. This act “redlined black neighborhoods, marking them as credit risks.” Redlining continues through segregated neighborhoods that have high poverty, poor infrastructure and low home values. Forbes reports that banks continue to unfairly target minorities by charging them higher interest rates. According to Forbes, in 2012, Wells Fargo “admitted it had steered black and Latino households into subprime mortgages but had offered white borrowers with similar credit profiles prime mortgages.”
Education can be an excellent way to pull people out of poverty. However, our education system is also skewed towards Whites, partially explaining higher poverty levels among minorities. Forbes reports that in 2011, “34% of whites completed a four-year college degree, whereas just 20% of blacks and 13% of Hispanics did. But obtaining a bachelor’s isn’t enough for a black or Hispanic person to escape the racial wealth gap. The return on investment in college is much higher for whites than for blacks and Hispanics: A white family at the median sees a return of $55,869 from completing a four-year degree. A black family sees $4,846 and a Hispanic family $4,191. Less obvious factors have historical roots in prohibitions against teaching slaves to read and the practice of “separate but equal” educational facilities. They continue to matter because parents’ educational level and family income and wealth are strong predictors of children’s educational success.”
In addition to education, homeownership can be another factor contributing to the wealth gap between Whites and minorities: “residential segregation keeps black and Hispanic families in school districts with low-quality, under-resourced schools, which can then influence students’ preparedness for college. Another cause is related to homeownership disparities: residential segregation keeps black and Hispanic families in school districts with low-quality, under-resourced schools, which can then influence students’ preparedness for college. The typical white family earns $50,400, while the typical black family earns $32,038, and the typical Latino family, $36,840. Additionally, black and Latino families earn a lower return on their incomes, meaning they are less able to turn each additional dollar of income into wealth. A white family will typically see a return of $19.51 for each dollar earned, while a black family will see only $4.80 in return and Latino families $3.63. Other factors stem back to homeownership and education: A child whose parents were steered into a low-income neighborhood with a low-quality school has decreased chances of obtaining a four-year degree, which also then cuts off future job opportunities.” (Forbes)
According to Demos.org, the wealth gap is severe even in two-parent households between minorities and Whites: “Black couples with children had $16,000 in wealth at the median, while Latino couples with children had $18,800 in wealth at the median. For each group, this is significantly more than the wealth of single-parent households. Yet it is a fraction of the $161,300 in median wealth held by white couples with children—and is still significantly less than the $35,800 in median wealth held by white single parents. Despite the financial benefits of marriage and partnership, including the opportunity to share expenses, provide child care within the family, or have two adult earners, the median white single parent is $19,800 wealthier than the median black couple with children, and $17,000 wealthier than the median Latino couple with children.” (Demos)
Demos goes on to write about wealth inequality between Whites and Blacks: “According to data from the Survey of Consumer Finances, the median white household that includes a full-time worker has 7.6 times more wealth than the median black household with a full-time worker. The median white household that includes a full-time worker also has 5.4 times more wealth than the median Latino household with a full-time worker. Even white households that include only part-time workers—with at least 1 person in the household employed but not working more than 35 hours a week—have statistically indistinguishable levels of wealth as black households with a member employed full-time. Additionally, black households with at least 1 worker employed full time had $10,800 in wealth at the median, while Latino households with at least 1 worker employed full time had $15,300 in wealth at the median. For both groups, this is significantly more than the wealth of households where workers held only part-time jobs. Yet it is nowhere near the $82,400 in median wealth held by white households with a full-time worker. Working full time is far from enough for households of color to catch up to white wealth. Despite all the wealth-building benefits of full-time employment, median black and Latino households with full-time workers had essentially the same level of wealth as the median white household with only part-time employment. Previous research from Demos and Institute on Assets and Social Policy at Brandeis University finds that if the distribution of incomes for black and Latino Americans was similar to that of white households (with a median equal to $50,400 in 2011), the wealth gap between black and white households would shrink just 11 percent at the median and the wealth gap between Latino and white households would shrink just 9 percent.” The study also looked at specific categories of spending, finding that white households spend about twice as much as black households on entertainment among all income groups and that white households, especially those with low incomes, spend more than black households on cars. The researchers note that “for clothing, jewelry, personal care, entertainment, eating out, and other non- essential spending, our findings show that black consumers in fact spend the same or much less than whites, at all income levels.”22 The only category in which black households were found to consistently spend more was for utilities, including payments for electricity, heating fuel, water, sewer and telephone service; this may be due to the common utility company practice of risk-based pricing, which requires a deposit or other form of additional payment from customers with low credit scores, without stable employment, or with criminal records. While technically color-blind, risk-based pricing can have a disproportionate impact on black consumers, causing them to be charged more than white households for the same service. Differences in spending habits cannot explain the racial wealth gap: white households spend more than black households with similar incomes, yet also have more wealth. While spending less and saving more may be excellent advice for individuals, the evidence suggests that personal spending habits are not driving the racial wealth gap and cannot succeed in closing it. (Demos)
The Atlantic shows how the roots of the wealth gap stretch far into American history: “The FHA had adopted a system of maps that rated neighborhoods according to their perceived stability. On the maps, green areas, rated “A,” indicated “in demand” neighborhoods that, as one appraiser put it, lacked “a single foreigner or Negro.” These neighborhoods were considered excellent prospects for insurance. Neighborhoods where black people lived were rated “D” and were usually considered ineligible for FHA backing. They were colored in red. Neither the percentage of black people living there nor their social class mattered. Black people were viewed as a contagion. Redlining went beyond FHA-backed loans and spread to the entire mortgage industry, which was already rife with racism, excluding black people from most legitimate means of obtaining a mortgage. In Chicago and across the country, whites looking to achieve the American dream could rely on a legitimate credit system backed by the government. Blacks were herded into the sights of unscrupulous lenders who took them for money and for sport. Contract sellers used every tool at their disposal to pilfer from their clients. They scared white residents into selling low. They lied about properties’ compliance with building codes, then left the buyer responsible when city inspectors arrived. They presented themselves as real-estate brokers, when in fact they were the owners. They guided their clients to lawyers who were in on the scheme. The income gap between black and white households is roughly the same today as it was in 1970. Patrick Sharkey, a sociologist at New York University, studied children born from 1955 through 1970 and found that 4 percent of whites and 62 percent of blacks across America had been raised in poor neighborhoods. A generation later, the same study showed, virtually nothing had changed. And whereas whites born into affluent neighborhoods tended to remain in affluent neighborhoods, blacks tended to fall out of them. The implications are chilling. As a rule, poor black people do not work their way out of the ghetto—and those who do often face the horror of watching their children and grandchildren tumble back. (The Atlantic)
The Atlantic also informs us that forces such as contract sellers and the FHA conspired to keep African-Americans from improving their lot: “The FHA had adopted a system of maps that rated neighborhoods according to their perceived stability. On the maps, green areas, rated “A,” indicated “in demand” neighborhoods that, as one appraiser put it, lacked “a single foreigner or Negro.” These neighborhoods were considered excellent prospects for insurance. Neighborhoods where black people lived were rated “D” and were usually considered ineligible for FHA backing. They were colored in red. Neither the percentage of black people living there nor their social class mattered. Black people were viewed as a contagion. Redlining went beyond FHA-backed loans and spread to the entire mortgage industry, which was already rife with racism, excluding black people from most legitimate means of obtaining a mortgage. In Chicago and across the country, whites looking to achieve the American dream could rely on a legitimate credit system backed by the government. Blacks were herded into the sights of unscrupulous lenders who took them for money and for sport. Contract sellers used every tool at their disposal to pilfer from their clients. They scared white residents into selling low. They lied about properties’ compliance with building codes, then left the buyer responsible when city inspectors arrived. They presented themselves as real-estate brokers, when in fact they were the owners. They guided their clients to lawyers who were in on the scheme. The income gap between black and white households is roughly the same today as it was in 1970. Patrick Sharkey, a sociologist at New York University, studied children born from 1955 through 1970 and found that 4 percent of whites and 62 percent of blacks across America had been raised in poor neighborhoods. A generation later, the same study showed, virtually nothing had changed. And whereas whites born into affluent neighborhoods tended to remain in affluent neighborhoods, blacks tended to fall out of them.” (The Atlantic)
According to peripherycenter.org, the wealth gap was caused by a number of discriminatory practices done by the government up through the 1940s: “After WWII, new federal policies and funding initiatives (e.g. the G.I. Bill) were created to offer veterans a chance to buy single family homes at affordable rates. However, real estate practices and federal government regulations directed government-guaranteed loans toward white homeowners, and away from non-whites. The underwriters for the Federal Housing Association (FHA) warned that that the presence of even one or two non-white families could undermine real estate values in the new suburbs, and these government guidelines were widely adopted by private industry (e.g. real estate developers). Using this scheme, federal investigators evaluated hundreds of cities across the country for financial risk and gave the highest rating (marked by the color green) to communities that were all white, suburban, and far away from minority areas. Communities that were all minority or in the process of changing were given the lowest rating and were marked by the color red (thus “redlined”). As a consequence, most mortgages and loans went to suburban America, which was being developed along explicit racial lines that benefitted the white community. To give some staggering context, from 1934-1962, the federal government underwrote $120 billion in new housing funding. Less than 2% of this went to non-white families.” (peripherycenter.org)
According to the New York Times, whites with at least some college education owned $79,600 in wealth, while blacks with the same level of education owned 11,100, and $Hispanics at the same level owned $20,500. Additionally, it argues: “Any setback, from a medical emergency to the unexpected loss of hours at work, can be devastating. It means that harsh punishments for the failure to pay small debts harm black families inordinately. Sometimes, the consequence is jail. Other times, electricity is cut, or wages garnished.” (NYT) According to Fortune magazine, attending college, having two-parent households, and having a full-time job, all hallmarks of a middle class lifestyle, does little to decrease the wealth gap between Whites and minorities.
Racial wealth inequality is a major issue that faces America. It is a sign that racial wounds have not healed and that minorities still suffer from discrimination. If we look at morality as it relates to the social injustice issue of wealth inequality, one has to consider the personal stories of those who were directly impacted by this. For example, my volunteer experience was at Presser Senior Apartments, which is a subsidiary of Presby’s Inspired Life. Presby’s Inspired Life is a “not-for-profit, faith-based organization that provides residential and continuing care and affordable housing for older adults” which serves over 3,000 seniors in the Philadelphia area. Its mission is to provide seniors with “quality residential living environments for people of limited economic resources”. The organization “offers a wide range of living experiences for adults 62-plus in greater Philadelphia.” At Presser Senior Apartments they accept a mixed income group of senior citizens. These individuals are mid to low income. Presby’s Inspired Life’s Program offers quality housing in a stable neighborhood to seniors who otherwise would not be able to afford rental property in the area. Additionally, the program offers seniors help with “independent living, personal care, skilled nursing and rehabilitative care.” (presbyinspiredlife.org).
During my experience volunteering at Presser, I provided companionship with and interviewed two residents: one gentleman talked about his youth in Ashbury Park and the racial segregation that existed during his upbringing. The areas of his life that helped to contribute to his movement out of poverty into a more middle class existence included a long stable marriage of 60 years and nearly 47 years of employment at SEPTA when he relocated to Philadelphia. This gentleman lacked access to higher educational opportunities, which he had to forego because of income and lack of access to the GI bill as a veteran, which he couldn’t access at the time of his service due to racial bias during the 1950’s.
Also interviewed was an older woman who participates in a daily program for seniors offered at Presser called the LIFE Program, operated by New Courtland. It is specifically designed to help keep low-income seniors engaged in healthy activities. The LIFE program is free for low-income seniors. It provides seniors with hot meals, medical aides, fresh foods, religious services, live music, access to doctors, dentists and specialists, physical, occupational, and speech therapy, pharmacy and prescriptions, home modifications, health insurance, transportation to local stores, restaurants, shopping centers and movie theaters, museums, holiday celebrations, personal counselors, personalized clinics, and 24/7 help from personal aides. Personal aides clean bathrooms, wash laundry, help with medication and exercise, and help seniors with many more items. The program also provides seniors with doctors, and helps them see specialists if necessary. In order to qualify, the senior has to be over 55, below a certain income, and nursing home eligible. The program is free for seniors below a certain income. Some of these activities would be quite costly if they were not connected to the senior program. This allows moderate and low-income senior citizens access to services that their more financially secure counterparts receive as part of more expensive retirement living communities (newcourtland.org). Retirement living communities are very expensive, costing nearly $200-$320 per day (helpguide.org). These continuing care communities tend to be racially stratified for the same reasons that residential communities are segregated: wealth inequality. This is yet again an example of how access to wealth plays out across one’s life span and is directly tied to access or lack of access.
I initially approached this assignment from a research perspective, as this is where I am most comfortable academically when learning about a topic. However, my volunteering really helped make the research aspects of this paper come alive for me because the companionship with low-income seniors made this a more human experience, and not just statistics on a paper. It helped me connect with the real-life joy and suffering of the people I spent time with.